[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]


                       AND RETALIATION WITHIN THE


                            BUREAU, PART THREE



                               BEFORE THE

                        SUBCOMMITTEE ON OVERSIGHT
                            AND INVESTIGATIONS

                                 OF THE


                     U.S. HOUSE OF REPRESENTATIVES


                             SECOND SESSION


                             JUNE 18, 2014


       Printed for the use of the Committee on Financial Services

                           Serial No. 113-85


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                    JEB HENSARLING, Texas, Chairman

GARY G. MILLER, California, Vice     MAXINE WATERS, California, Ranking 
    Chairman                             Member
SPENCER BACHUS, Alabama, Chairman    CAROLYN B. MALONEY, New York
    Emeritus                         NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York              BRAD SHERMAN, California
EDWARD R. ROYCE, California          GREGORY W. MEEKS, New York
FRANK D. LUCAS, Oklahoma             MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey            WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina   STEPHEN F. LYNCH, Massachusetts
JOHN CAMPBELL, California            DAVID SCOTT, Georgia
MICHELE BACHMANN, Minnesota          AL GREEN, Texas
KEVIN McCARTHY, California           EMANUEL CLEAVER, Missouri
STEVAN PEARCE, New Mexico            GWEN MOORE, Wisconsin
BILL POSEY, Florida                  KEITH ELLISON, Minnesota
    Pennsylvania                     JAMES A. HIMES, Connecticut
LYNN A. WESTMORELAND, Georgia        GARY C. PETERS, Michigan
BLAINE LUETKEMEYER, Missouri         JOHN C. CARNEY, Jr., Delaware
BILL HUIZENGA, Michigan              TERRI A. SEWELL, Alabama
SEAN P. DUFFY, Wisconsin             BILL FOSTER, Illinois
ROBERT HURT, Virginia                DANIEL T. KILDEE, Michigan
STEVE STIVERS, Ohio                  PATRICK MURPHY, Florida
STEPHEN LEE FINCHER, Tennessee       JOHN K. DELANEY, Maryland
MARLIN A. STUTZMAN, Indiana          KYRSTEN SINEMA, Arizona
MICK MULVANEY, South Carolina        JOYCE BEATTY, Ohio
RANDY HULTGREN, Illinois             DENNY HECK, Washington
DENNIS A. ROSS, Florida              STEVEN HORSFORD, Nevada
ANN WAGNER, Missouri
ANDY BARR, Kentucky
TOM COTTON, Arkansas
KEITH J. ROTHFUS, Pennsylvania

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
              Subcommittee on Oversight and Investigations

              PATRICK T. McHENRY, North Carolina, Chairman

MICHAEL G. FITZPATRICK,              AL GREEN, Texas, Ranking Member
    Pennsylvania, Vice Chairman      EMANUEL CLEAVER, Missouri
SPENCER BACHUS, Alabama              KEITH ELLISON, Minnesota
PETER T. KING, New York              CAROLYN B. MALONEY, New York
MICHELE BACHMANN, Minnesota          JOHN K. DELANEY, Maryland
SEAN P. DUFFY, Wisconsin             JOYCE BEATTY, Ohio
STEPHEN LEE FINCHER, Tennessee       DENNY HECK, Washington
RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
ANN WAGNER, Missouri                 STEVEN HORSFORD, Nevada
ANDY BARR, Kentucky
KEITH J. ROTHFUS, Pennsylvania

                            C O N T E N T S

Hearing held on:
    June 18, 2014................................................     1
    June 18, 2014................................................    39

                        Wednesday, June 18, 2014

Naraghi, Ali, Examiner, Southeast Region, Division of 
  Supervision, Enforcement and Fair Lending, Consumer Financial 
  Protection Bureau..............................................     7
Williams, Kevin A., former Quality Assurance Monitor, Office of 
  Consumer Response, Consumer Financial Protection Bureau........    11


Prepared statements:
    Naraghi, Ali.................................................    40
    Williams, Kevin A............................................    45

              Additional Material Submitted for the Record

McHenry, Hon. Patrick T.:
    Letter from Akin Gump Strauss Hauer & Feld LLP, dated June 
      17, 2014...................................................    50
    Article from the Washington Examiner entitled, ``CFPB 
      official wants to silence a whistleblower before he can 
      talk to Congress,'' by Richard Pollock, dated June 17, 2014    55
Green, Hon. Al:
    ``Objective and Approach for Offices of Inspector General 
      (OIG) Review of Office of Minority and Women Inclusion 
      (OMWI) Activities, Requested by Ranking Member and 
      Colleagues, House Financial Services Committee, on March 
      24, 2014,'' dated May 21, 2014.............................    58


                       AND RETALIATION WITHIN THE


                           BUREAU, PART THREE


                        Wednesday, June 18, 2014

             U.S. House of Representatives,
                          Subcommittee on Oversight
                                and Investigations,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:05 p.m., in 
room 2128, Rayburn House Office Building, Hon. Patrick T. 
McHenry [chairman of the subcommittee] presiding.
    Members present: Representatives McHenry, Fitzpatrick, 
Duffy, Fincher, Hultgren, Wagner, Barr, Rothfus; Green, 
Cleaver, Beatty, Kildee, and Horsford.
    Ex officio present: Representative Hensarling.
    Chairman McHenry. The subcommittee will come to order. The 
title of today's hearing of the Oversight and Investigations 
Subcommittee is, ``Allegations of Discrimination and 
Retaliation Within the Consumer Financial Protection Bureau, 
Part Three.''
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time.
    The Chair now recognizes himself for 5 minutes for an 
opening statement.
    On Thursday, March 6, 2014, the American Banker published 
an article titled, ``CFPB Staff Evaluations Show Sharp Racial 
Disparities.'' It provided evidence that the Consumer Financial 
Protection Bureau's (CFPB's) own managers have shown distinctly 
different patterns in how they rate employees of different 
    It is now apparent that the CFPB was aware of the racial 
disparities and key metrics well before the March 6th American 
Banker article. A study on diversity and inclusion commissioned 
by the CFPB and conducted by the revered consulting firm, 
Deloitte Consulting, was provided to the Bureau in September of 
2013. That study noted sharp racial disparities in performance 
ratings, pay, hiring, and other areas.
    In addition to racial disparities in the CFPB's performance 
reviews, the American Banker also reported that, ``CFPB's 
management has been accused in several cases of favoring 
Caucasian men and of creating a hostile work environment.'' The 
article noted that CFPB employees had filed 115 official 
grievances with the National Treasury Employees Union (NTEU), 
which represents CFPB employees, and over 85 informal 
complaints, most of which pertained to allegations of unequal 
pay, and raised questions about the recent performance reviews.
    This subcommittee held a hearing on April 2nd of this year, 
which addressed allegations of discrimination and retaliation 
at the CFPB. It featured the testimony of Angela Martin, a 
current CFPB employee and a whistleblower, as well as Misty 
Raucci, an investigator hired by the CFPB to examine Ms. 
Martin's claims of retaliation.
    On May 21st of this year, the subcommittee held a second 
hearing on the topic of discrimination and retaliation within 
the Bureau. Liza Strong, Lead of Employee Relations for the 
CFPB, testified that the allegations of discrimination and 
retaliation made by Ms. Martin and Ms. Raucci were not 
consistent with her experience at the CFPB.
    Ben Konop, an attorney within the CFPB's Enforcement 
Division, and the Executive Vice President of the union chapter 
representing CFPB employees, testified on CFPB's resistance to 
addressing sharp racial disparities on its performance 
management review ratings from the period of March 2014 through 
May 6, 2014. And that is when the American Banker article was 
published, that March 6th date. Mr. Konop also testified about 
sharp racial disparities and pay in the Bureau.
    Today's hearing will feature testimony from two 
whistleblowers who both allege that they experienced 
discrimination and retaliation at the Bureau. Both 
whistleblowers will also testify regarding operational 
deficiencies within their respective divisions at the CFPB.
    Ali Naraghi currently serves as an examiner in the Division 
of Supervision, Enforcement and Fair Lending at the CFPB. Mr. 
Naraghi alleges that he has experienced both discrimination and 
retaliation at the CFPB. Mr. Naraghi will also testify about 
deficiencies in the bank examination process as well.
    Kevin Williams is a former term employee of the CFPB's 
Office of Consumer Response. Mr. Williams will testify on the 
culture of discrimination and retaliation within the Office of 
Consumer Response, as well as the mismanagement and 
inexperience of leaders within the office. Mr. Williams will 
also testify about serious problems with the CFPB's consumer 
call center.
    These problems include a significantly larger than expected 
number of breaches of personally identifiable information 
(PII), a lack of training for call center staff, and inadequate 
CFPB oversight of its two call centers.
    CFPB's funding--I believe and many believe--and structure 
afford Congress an extremely limited ability to influence the 
Bureau's operations and policies. And yet these allegations of 
discrimination and retaliation at the CFPB underscore the 
significant need for greater congressional oversight and much 
better management.
    I thank the witnesses for their bravery in coming forward, 
and your willingness to come forward. I appreciate your 
    With that, I ask unanimous consent to include a letter in 
the record, and I will give context to my colleagues. 
Yesterday, the subcommittee received a letter from John Dowd, 
legal counsel for Liza Strong, a high-ranking CFPB official who 
previously testified before this body, asking that the 
testimony of one of today's witnesses, a whistleblower, be 
stricken from the committee's official record.
    This letter is deeply troubling because it is apparently an 
attempt to prevent certain testimony from coming before the 
subcommittee and the American people. That is problematic. And 
I would like to make it public.
    It could be construed as an effort to intimidate other 
witnesses at the Bureau as well who may wish to blow the 
whistle to Congress. And it may interfere with the 
congressional oversight that our subcommittee and other 
committees are attempting to provide.
    I ask unanimous consent that the letter, and a June 17th 
Washington Examiner article reporting on that letter, be 
entered into the record. And I would like to make clear that 
this subcommittee intends to thoroughly investigate whether 
this letter was an effort to, in any way, constrain this 
    I ask unanimous consent to include those items in the 
    Chairman McHenry. Without objection, it is so ordered. And 
I would certainly welcome those who are testifying today, and 
would be willing to include in the record of this day's 
proceedings your or your attorney's responses to that.
    At this point, we will recognize the ranking member of the 
subcommittee, Mr. Green of Texas, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    I thank the staff for the very fine work it has done in 
preparing for this hearing today. I also thank the witnesses 
for appearing today. And I have several things that I would 
like to note in terms of what I am committed to.
    I am committed to getting to the bottom of the allegations 
of discrimination. I believe that discrimination is abhorrent 
and that it must be eradicated. And to this end, I pledge to do 
all that I can to help eliminate invidious discrimination.
    I have to also add, having been a judge for some number of 
years, I have learned that until you hear both sides of a 
story, you should not draw conclusions. I welcome your 
testimony. But I cannot draw conclusions until I have heard 
from other sides as well. I think that is a fair way to 
    In fact, it is the American way to give all persons the 
opportunity to be heard before conclusions are drawn. So, I am 
committed to getting to the bottom of allegations of 
    I am also committed to protecting the institution, the 
CFPB, the Consumer Financial Protection Bureau. And I believe 
the witnesses are committed. And I shall make inquiry when 
appropriate. But I believe you are committed to this as well.
    I believe that the institution is absolutely necessary. It 
is the cop on the beat. It is there to protect the consumer. 
And as such, I liken any allegations of invidious 
discrimination to concerns that may emanate from a police 
    In a police department, you can have concerns raised about 
discrimination and other issues as well. We have had some 
raised in my city. But we didn't eliminate the police 
department. We dealt with the issues. And they should be dealt 
with. But you keep the department.
    I see the CFPB as a department that may have some concerns 
that have to be addressed. But we keep the department. And we 
want to make sure that we keep it strengthened.
    We don't want to eviscerate. We don't want to emasculate. 
We want to make sure that we maintain a strong Consumer 
Financial Protection Bureau.
    And the third thing that I am committed to is a widening of 
these investigations. The ranking member of the full Financial 
Services Committee and I have so much as asked the Inspectors 
General to look into allegations of discrimination, widen the 
range and breadth of these allegations, and check to see if 
there are other agencies that may be having similar 
    We should not focus on the Consumer Financial Protection 
Bureau to the exclusion of others. It can be a part of a 
process, but not the end of a process. To this end, I pledge 
and I am committed to widening the range of the investigation.
    And finally, I want to say that this hearing today is 
important to me. It is important to me for a multiplicity of 
reasons. I shall cite but one.
    In my lifetime, I have been discriminated against. I know 
what it feels like to be discriminated against. I have seen 
invidious discrimination.
    I know what it smells like. I have had to go to the colored 
water fountains that were such that no one would want to drink 
the water. I know what it looks like. I have had the Klan burn 
a cross related to some of my efforts. I know what it sounds 
like. I have been called ugly names, names that I don't even 
    So I know what it is about. But I also know this: We have a 
duty to be fair to all persons associated with any allegations. 
So I pledge to do all that I can, which means to be fair to all 
sides and not draw conclusions based upon what I hear from any 
one side.
    Mr. Chairman, in the interest of time and because votes 
have been called, I will yield back my time.
    Chairman McHenry. I thank the good judge.
    With that, we will now recognize Mr. Hultgren for 2 
    Mr. Hultgren. Thank you, Mr. Chairman.
    There is something deeply wrong with the day-to-day 
operations at the Bureau. We will hear allegations of rampant 
favoritism, discrimination, cronyism, and mismanagement at the 
CFPB alongside a culture of intimidation and retaliation that 
make it difficult to address these problems. We will also hear 
disturbing concerns about the efficiency and efficacy of the 
CFPB's examination process, which are essential to the CFPB's 
alleged mission to protect consumers.
    Unfortunately, not only do CFPB employees feel helpless to 
do anything about this, but there is also inexplicably no 
meaningful accountability mechanisms in place that could help 
fix these problems. The independent Inspector General for the 
Federal Reserve and the CFPB is stretched thin overseeing 
around 3,200 employees. The CFPB, one of the most unaccountable 
agencies in our Nation's history, could certainly use its own 
    What is more, unlike the SEC and other regulatory agencies, 
the CFPB is governed by one lone Director instead of a 
bipartisan board. Not only that, Congress is hampered from 
using its power of the purse to encourage much-needed changes.
    The CFPB's champions hold that these features that make the 
Bureau unaccountable are an asset because they help it function 
smoothly without outside interference, and better serve 
consumers. This hearing should put that myth to rest.
    Consumers are not protected by unrestrained bureaucrats 
unbound by the Constitution's structure. The founders knew 
better than to create agencies unaccountable to the American 
people. They knew as we do that government programs don't 
function well without healthy oversight and accountability 
features in place.
    While we all want these disturbing allegations of 
discrimination and incompetence to be addressed in a way that 
vanquishes these problems for good, until the CFPB structure is 
significantly altered, I am not holding my breath.
    Thank you, Mr. Chairman. I yield back.
    Chairman McHenry. I thank my colleague.
    In the interest of Members' time we will, after Mr. 
Cleaver's opening statement, recess and then return once we 
have Members back. And then, we will hear the testimony.
    Mr. Cleaver is recognized for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman. I appreciate you 
calling the hearing and dealing with this issue of 
    I think discrimination is regrettable. It is stupid. It is 
heartless. And it is about as unseemly as a human being can 
    Much of my adult life has been spent dealing with the 
issue. I hate discrimination and all of its manifestations. I 
think that we ought to shed light on discrimination in any of 
the Federal agencies that report to this committee.
    As I have done before, I will continue to say that the one 
department that I think the whole world recognized as having 
the most serious problems in the Federal Government on the 
issue of discrimination was the Department of Agriculture. So 
much so that the Federal courts awarded African-Americans, 
Latinos, and Native Americans awards, financial awards because 
the discrimination was so blatant.
    And it went on for decades and decades that actually 
started right there at the Department of Agriculture. Most of 
that has been corrected with the Disparity Study. And 
recommendations have been brought forth. And the Secretary has 
tried to deal with them.
    But not one hearing was held in the U.S. House of 
Representative or the U.S. Senate to deal with an individual 
case. It went to the courts. And the courts, after years, ruled 
that discrimination in fact had occurred. And the money, 
frankly, is still being disbursed even as we meet here today.
    And so my caution, Mr. Chairman, is that we get bogged down 
in doing something the Federal agencies and the committees of 
the Congress were not equipped to do, and that is actually hold 
a trial. I am going to depend on my longtime friend and 
colleague who has a law degree and has been a judge. But I am 
not equipped, I don't think.
    I did get an ``A'' in political science, but I don't think 
that has equipped me to deal with a trial-like situation and 
then at the end say we did have discrimination or this has been 
an act of discrimination. Because that means we are a jury.
    So I am pleased to see the corrective actions that are 
being taken. I think that your interest has probably caused the 
department to become a lot more conscious of and sensitive 
about anything that could be seen as discrimination. And so, 
that has been good.
    I caution you, members of the committee, that we don't end 
up becoming the jury for discrimination cases in one Federal 
    Thank you, Mr. Chairman. I yield back the balance of my 
    Chairman McHenry. I appreciate my colleague's sentiments 
and words.
    We will recess, and once Members return, we will hear from 
the witnesses. This committee is in recess.
    Chairman McHenry. The committee will come to order. We will 
now recognize the distinguished panel before us.
    I will first introduce Mr. Ali Naraghi. He is an examiner 
for the Southeast Region in the Division of Supervision, Fair 
Lending and Enforcement for the CFPB. He has worked as an 
examiner at the CFPB since July 2011. Prior to joining the 
CFPB, Mr. Naraghi served as a Supervisory Financial Analyst at 
the Federal Reserve Board for 14 years.
    Mr. Naraghi is a graduate of the American Bankers 
Association Stonier Graduate School of Banking at Georgetown 
University, and received a Masters of Business Administration 
from Mississippi State University. Mr. Naraghi has also 
received numerous awards during his tenure at the Federal 
Reserve Board, including the Excellence Award for examination 
of mortgage servicing.
    Our second witness is Mr. Kevin Williams. Mr. Williams is a 
former Quality Assurance Monitor for the Office of Consumer 
Response for the CFPB. Mr. Williams was hired in March 2011 as 
a term employee, and his service at the CFPB ended in February 
of 2014. Mr. Williams was responsible for CFPB's contract call 
centers, and ongoing maintenance of the quality assurance 
program, including contract call center performance issues. 
Prior to his hiring at the CFPB, Mr. Williams managed private 
sector call service centers and performed operational analysis 
for various consulting firms.
    Mr. Williams is a graduate of Trinity University in 
Deerfield, Illinois, and received a Masters of Business 
Administration from the University of Phoenix. He also received 
professional certification for contracting contact centers and 
    The witnesses will each be recognized for 5 minutes. And as 
this is the first time either of you has testified before the 
committee, we ask that you please pull the microphone 
uncomfortably close to you; they are directionally sensitive. 
And so, if you speak a little more slowly, it will obviously be 
more helpful.
    We have a lighting system: green means go; yellow means go 
faster; and red means stop.
    First, we will recognize Mr. Naraghi for his opening 


    Mr. Naraghi. Thank you, Mr. Chairman. My name is Ali 
Naraghi, and I currently serve as an examiner in the Southeast 
Region of the Supervision, Enforcement and Fair Lending 
Division at the Consumer Financial Protection Bureau. Thank you 
for allowing me this opportunity to share my experience at the 
CFPB with you.
    Ms. Angela Martin mentioned me in her testimony on April 
2nd of this year. I am the naturalized U.S. citizen that Bureau 
management referred to as an ``F'ing foreigner.'' I take great 
pride in serving my country for 14 years with distinction at 
the Federal Reserve Board of Governors, prior to joining the 
Bureau 3 years ago at its inception. And I am proud of my 
Persian heritage.
    Like many others, I feel fortunate to have immigrated to 
the United States, and love to serve my country. I do not 
deserve to be referred to in derogatory terms by Bureau 
    I hope by telling you my story it will further enlighten 
the committee about the cultural intimidation and retaliation 
at the Bureau, and how it makes it very difficult for employees 
to raise concerns about mistreatment, mismanagement, and abuse 
of authority.
    Many managers, especially within the Southeast Region, are 
withholding promotions of internal candidates while bringing 
external candidates from their personal or other connections. 
In short, favoritism and cronyism runs rampant at the Bureau.
    My testimony is based specifically on my experience with 
management of the Southeast Region and management in the Office 
of Supervision at the headquarters at the Bureau, and is not a 
reflection of my fellow examiners, who like me are highly 
dedicated to serving the American consumers.
    Our lead examiner for the first year of CFPB examination, 
which was started in October of 2011, during those 5 months in 
that assignment I raised concerns about not having a risk model 
to show equitable assessment across institutions: inexperienced 
exam managers, field managers, and the examiner in charge; the 
examiner in charge being unduly influenced by the institution 
being examined, allowing the institution to dictate what CFPB 
examiners can and cannot do; inefficient use of Bureau 
resources, for example, they flew in examiners from around the 
country for weeks just to plan the examination and later to 
conduct an exam when we had plenty of locally available 
examiners who would have saved taxpayers up to 5 months' travel 
expenses, an average expense of $2,000 per week per examiner.
    I soon found that voicing a professional dissenting opinion 
that is in any way at odds with Bureau management, even in the 
smallest of ways, would result in retaliation, for example, 
after suggesting to the Chief Human Capital Officer, Dennis 
Slagter, that senior management should consider including 
experienced staff from the Federal Reserve, the Office of the 
Comptroller of the Currency, and the FDIC when strategizing 
about large banks supervision program because CFPB's 
supervision seemed too OTS-centric.
    In response, Mr. Slagter stated, ``If you don't like it, go 
back to the Federal Reserve Board.'' This is in direct 
contradiction of CFPB's stated policy of welcoming feedback.
    In addition, I have raised concerns to management and the 
Office of Inspector General of the Federal Reserve about the 
following issues: the Bureau has hired inexperienced managers 
whose only qualification appears to be personal or other 
connection to Bureau hiring officials; gross mismanagement that 
wastes taxpayers' funds, for example, in the Southeast Region, 
about 50 to 75 examiners were kept at their home essentially 
without work for 8 months between approximately September 2011 
through May of 2012. In my opinion, this was one of many 
examples of wasting taxpayers' funds due to Supervision 
management's incompetence.
    Result-oriented examinations in which the Bureau at the 
headquarters appears to have decided at the outset to find a 
violation even if none are identified. I worked on examination 
for 3 weeks reviewing 52 mortgage modification applications and 
did not find any violations. The field manager told me that I 
must not have done my job right because I had not identified 
any violations. Others in my team were told to expand their 
sample size if no violations were identified in the initial 
sample. This is contrary to sampling procedures of the FFIEC 
and prudential regulators. Furthermore, there is no 
statistically sound rationale in conducting examinations in 
this manner.
    CFPB management imposes cumbersome and inefficient national 
exam procedures for examinations, and doesn't give examiners or 
the EICs any discretion in applying those positions. The exams 
are very inefficient. They take at least 6 weeks on-site, 
regardless of the size in assets and our footprint. Whereas 
exams performed by other regulators take size, risk, and 
complexity of institutions into consideration during the 
planning and scoping phase of the examination, resulting in a 
more efficient and cost-effective process.
    The Enforcement Division joined the examiners and 
occasionally mentioned plans to bring enforcement actions prior 
to completion of exam work and of discovering a violation. I 
did my best to work within the Bureau's management and 
oversight instruction to address this issue. However, once 
management had started to retaliate, and as they are being 
subjected to disparate treatment, I filed an EEO complaint 
against the Southeast Region's management.
    I immediately became one of the targets of Regional 
Director Jim Carley and Assistant Director of Supervision Paul 
Sanford at the CFPB headquarters as a result of questioning 
examination management and filing a formal case about abuse and 
disparate treatment. They proceeded to make my professional, 
and also I think, personal life a living hell by repeated 
retaliation and creating a hostile work environment.
    Examples of retaliations include immediately after filing 
an EEO complaint in May of 2012, management issued me a 
reprimand letter for not attending a training class which I was 
registered for by management without my knowledge. Removing me 
from being an EIC and requiring me to attend training to serve 
as an EIC as a requirement only for me and no other at my 
grade. In fact, I haven't been assigned an EIC role since 
filing my EEO case, despite it being a requirement in my 
position description, the highest examiner grade for the 
    Reporting me absent without leave for an entire week for 
requesting sick leave, despite having a doctor's note requiring 
bed rest to avoid getting pneumonia due to severe bronchitis. 
Accused of asking bank management to show me how to do my job, 
when in fact I was trying to protect the integrity of the 
Bureau by helping the field manager recover from asking 
questions that demonstrated his incompetence and lack of 
knowledge about mortgage banking.
    Being wrongfully accused of--accused and written up for 
falling asleep at a meeting with the institution's president. 
The fact as reported by the EEO independent investigator that I 
was awake and most active when was confirmed by several 
colleagues and a CFPB enforcement attorney who were present. 
However, Mr. Carley insisted that my field manager issue a 
written warning threat of disciplinary action.
    I was issued ``unsatisfactory,'' which is our lowest 
performance evaluation rating, in 2012, when in fact at midyear 
I was rated ``commendable.'' This was my punishment for raising 
concerns about my manager during the last 3 months of the 
evaluation period. And in February of 2014, my field manager 
informed me that he knows I am well-qualified, but the order 
that I cannot be an EIC came from above the Assistant Regional 
Director level.
    Like Ms. Martin, the retaliation against me continues to 
this day. Like Ms. Martin, my story is a microcosm. And when 
you look at me, you should see dozens and even scores of 
employees instead of just me. The Labor Relations Office within 
the Office of Human Capital is broken, and is more harmful than 
helpful to employees who suffer discrimination or retaliation.
    Because I was concerned about examiners who work with me as 
well as my own treatment, I wrote an urgent email on July 26, 
2012, asking the Deputy Human Capital Officer and Employee 
Relations Lead, Ms. Liza Strong, for help. I pointed out the 
mistreatment I was receiving as well as listing directives 
provided to examiners by field manager Jerome Uberu, which 
according to my experience was unprofessional, contrary to the 
standard supervisory protocols, and possibly illegal.
    It took from July 26, 2012, until October 18, 2012, nearly 
3 months, for Ms. Strong to reply to me. Unlike her testimony 
before you that she investigates all complaints, her response 
was simply to add retaliation claims to my EEO complaint.
    I was stunned that she did not show any interest or concern 
regarding management's mistreatment of myself and my fellow 
examiners, or at least potentially illegal directives. As a 
matter of fact, not only did she not investigate my complaint, 
she refused to be interviewed by the EEO investigator assigned 
to my EEO case.
    Pursuant to an announcement on CFPB's internal Internet 
titled, ``CFPB Wants You to Blow the Whistle on Lawbreakers,'' 
I felt compelled to report my observations to the Inspector 
General of the Federal Reserve Board.
    I was promptly contacted by an IG staff member and as 
instructed on July 25, 2012, sent an email detailing my 
situation, as well as bullets enumerating what I thought to be 
mismanagement by division senior management, waste of 
government resources, favoritism in hiring practices, as well 
as what I thought may be illegal labor practices. I was told 
that the IG office will be in touch if necessary. However, no 
one has contacted me since that date.
    Furthermore, I attempted to engage my Regional Director, 
Jim Carley, by sending him an email requesting time to discuss 
an important matter. I never got a chance to discuss my 
concerns with him. Mr. Carley never attempted to follow up with 
me to ask what was so important.
    One of my concerns at the time was that during examination, 
the field manager, Mr. Uberu, was inappropriately telling 
examiners to find issues against the supervised entity that did 
not exist, but were solely based on his opinion that the 
subject bank had issues. All affected examiners felt 
uncomfortable with Mr. Uberu's approach at the time, but were 
afraid to speak out for fear of retaliation.
    After I pointed out Mr. Uberu's mistake, he wrote the worst 
evaluation I have ever received in my professional career. The 
evaluation intentionally misrepresented incidents and sometimes 
even falsified the records of what took place in the Bureau of 
    Management's mischaracterization has been proven wrong by 
an independent investigator from the Internal Revenue Service 
assigned to my EEO case. In that investigation, one of my 
colleagues bravely testified that the field manager, Mr. Uberu, 
``felt intimidated by Mr. Naraghi's experience and 
credentials.'' My colleague further reported that, ``Mr. 
Uberu's management style is one of intimidation and force.''
    Unfortunately, Ms. Strong wholly ignored my complaint about 
this manager. And now others have suffered and are continuing 
to suffer under his mismanagement. Subsequent to my complaint 
at least two other examiners have also reported their own 
serious complaints about Mr. Uberu's boorish intimidation 
    Ms. Strong's outright dismissal of my own legitimate 
concerns of mismanagement has caused Mr. Uberu to become more 
brazen in his intimidation and abuse of my fellow examiners. I 
am deeply saddened with the realization that my colleagues' 
hardship could have easily been avoided if the Bureau had acted 
promptly and responsibly to the concerns of its employees.
    Employee Relations Lead Liza Strong is failing to 
adequately protect Bureau employees, and in fact causes us 
further harm by holding herself out as point of contact for us 
to address our concerns, when actually she is just another arm 
of management and another example of the Bureau's management 
abusing their power.
    I appealed my manager's unfair evaluation of me, and all 
CFPB management across other divisions who were supposed to 
complete an independent review of my appeal circled the wagons. 
As a result, in the most humiliating experience, Mr. Carley, 
who himself has lesser to no experience in Federal mortgage 
servicing laws, forced me to attend remedial mortgage servicing 
training with the threat of being fired if I cannot pass the 
    My field manager expressly told me that I am untrainable. 
By point of fact, I told my management and Labor Relations 
staff that I have earned two bachelor's degrees, an MBA, and 
graduated from ABA Stonier Graduate School of Banking. So, 
CPFB's mischaracterization of me as untrainable is demonstrably 
    When my fellow examiners found out that I may be appearing 
as a witness here, many of them personally contacted me and 
urged me to be certain to shed light on the unfair and 
sometimes deceptive practices of supervision management. 
Unfortunately, the Southeast Region examination program is run 
by intimidation. And like a dictatorship, there are significant 
consequences to disagreeing or disobeying the king.
    Almost every examiner I know has pending or rejected 
grievances. Management espouses collaboration and respect with 
the staff and shows no respect with examiners. And there is no 
accountability for their abusive power.
    Contrary to Ms. Strong's testimony, legitimate concerns and 
complaints filed by examiners are rejected outright without due 
consideration. I believe that the Labor Relations Office, 
headed by Ms. Strong, is a common denominator in the 
mistreatment of examiners and other employees.
    It seems like Labor Relations will side with management no 
matter how egregious their actions may have been, which has 
caused resentment and distrust amongst the employees. The lack 
of prompt attention and resolution by the CFPB to legitimate 
employee concerns causes problems to fester needlessly and 
detracts from the ability to focus on the mission of helping 
American consumers.
    I believe that the root cause of the problems encountered 
at the Bureau is management's lack of accountability. The only 
consistent thing about CFPB management is its inconsistency.
    It is my sincere hope that the Bureau will take immediate 
steps to remedy these fundamental management issues and thereby 
become more efficient in carrying out this vital mission for 
our country.
    Thank you.
    [The prepared statement of Mr. Naraghi can be found on page 
40 of the appendix.]
    Chairman McHenry. Thank you.
    Mr. Williams, you are now recognized to summarize your 
opening statement.

                       PROTECTION BUREAU

    Mr. Williams. Good afternoon, Mr. Chairman, and 
subcommittee members. It is without any joy that I appear 
before you today.
    My name is Kevin A. Williams. In the fall of 2011, I 
enthusiastically applied to help build and launch the Consumer 
Financial Protection Bureau, the financial regulatory agency 
that was dubbed a 21st Century organization. I served as the 
CFPB Office of Consumer Response's first Quality Assurance 
Monitor from July 2011 to February 2014.
    The terms of my employment were a year-to-year term 
contract. Understanding the provision of my contract, I made it 
paramount that I will work hard and secure permanent employment 
as soon as possible. At various times, I approached management 
about my status, and in every term they lied. Whether I 
inquired, or the National Treasury Employees Union inquired on 
my behalf, we were both consistently lied to.
    Sadly, instead of the positive, modern government agency I 
expected, my experience at the CFPB was reminiscent of past 
eras of injustice, cronyism, discrimination, and retaliation. 
The events that transpired at the Bureau occurred because basic 
measures were not in place to properly supervise its untested 
management. In particular, the managers in the Office of 
Consumer Response ran the unit as their own personal fiefdom, 
unfettered by any oversight they inadvertently might receive.
    The divisiveness and disharmony in CR, Consumer Response, 
did not occur because of unruly employees, underperformers or 
disenchanted team players. It occurred because Consumer 
Response's unproven management team was not properly prepared 
for the big job we face. No policies or procedures were 
implemented to ensure that they abided by applicable laws and 
followed accepted management practices.
    I was the only member of the implementation team who was 
not offered permanent employment or a promotion. Yet, some of 
the people I worked with now lead Consumer Response. My 
treatment was especially notable because I was a lone team 
member who performed most of the quality assurance function for 
the entire agency's contact centers.
    My statement is not long enough to respond to all of the 
aspersions that were directed at me. But I ask you to question 
how a person responsible for your consumer interaction quality 
assurance function for a new Federal agency could be excluded 
from meetings, and branded as lazy and unproductive.
    I am proud of my principles and my work. My best response 
to any management disagreement of my job performance, Consumer 
Response continuously touted the results I produced. Consumer 
Response's management team continuously received bonuses based 
in part on my work.
    I worked on the quality assurance team supervised by two 
Black women managers. One of my managers was a manager in name 
only. For over 2 years, she did little more than discredit my 
work, disparage my character, and downplay my achievements.
    I was attacked, maligned, and humiliated on a daily basis. 
For example, I was rated as an ``average'' employee despite 
being either the primary or the only quality assurance monitor 
for the entire agency's contact center vendor. I listened to 
more calls, talked to more consumers, and made more 
correspondence than anyone in the agency. And yet, I received 
absolutely no credit for my work.
    Make no mistake about it. It was clear I was treated this 
way and allowed to be treated this way by my few Black managers 
at the Bureau because of the ``plantation'' mentality that 
exists there. If my managers had been White managers instead of 
Black managers allowed to mistreat a Black male, every civil 
rights organization in America would have protested my 
treatment and the treatment of others in my unit.
    I told Consumer Response's management team that the 
scorecard used to evaluate consumer interaction with contacts 
in personnel was ineffective. Consumer interactions were 
randomly selected and evaluated either by myself primarily or 
later, when the team expanded, by others. The scorecard was 
ineffective because it was weighted so that the vendor was 
never heavily penalized.
    This had two results. One, it would appear that the vendor 
was providing superb service because their score was in the 
90s. Two, it would appear that Consumer Response was 
effectively managing the contract even though it was not.
    When I expressed a problem with the way the scoring was 
weighted and the results utilized, my African-American 
managers, a quality assurance manager and section chief, their 
response was to inform the bosses that I was incapable of doing 
anything, of even doing the basics. And this wasn't because I 
was incorrect, but because she was offended that I, 
notwithstanding that I am a Black male, questioned the scoring 
    My Black managers, and thus the Bureau, treated me as a 
pariah because as a Black male I was not qualified to question 
the information provided by consultants, precisely and mainly 
because most of them were young White men.
    Another example stems from the vendors being very concerned 
about receiving high quality assurance scores so as not to get 
penalized in Bureau contracting decisions. Thus, when we would 
evaluate an agent more than once in this short amount of time, 
the vendor would call and complain to my manager that we were 
singling out an individual.
    However, we would have no idea of certain functions about 
the individual we would even evaluate. The way we selected 
items to evaluate was typically random. Consequently, in 
response, one of my former coworkers who is an African-American 
male told the quality assurance manager it does not matter who 
you evaluate because we are not looking at the interaction of 
any particular agent.
    The quality assurance manager did not agree with this 
statement from the male African-American QA monitor. However, 
she agreed with the same statement from a White male 
    Another example how Black managers at the Bureau were 
allowed to mistreat Black employees as part of misguidedly 
defending the Bureau is when I did a presentation. I told the 
QA manager and the section chief that the two-way scoring 
system was out of line. I reported it to the QA manager, told 
them that it was distorting Bureau assessments of vendor 
performance. In response, my QA manager spoke to her superiors 
about my performance.
    The Bureau's leadership allowed my manager and section 
chief to undermine me and even my career, but not allow me to 
make the same insightful observation that the managers would 
accept from White male consultants who patronized them by 
cluing them in about the distorted evaluation system. This is 
    The frequency and duration of these occurrences created a 
hostile work environment for all Blacks at the Bureau, whether 
they were unwitting, manipulated Black managers or mistreated, 
hard-working Black employees. It is just that we, the latter, 
suffered the objective adverse consequences. Despite 
establishing the quality assurance team, my efforts generally 
were discounted.
    The exception proven to this rule, however, was when 
Consumer Response's managers themselves would be rated based on 
the contact center being presented as being successful. In this 
regard, while I was there the managers I reported to were rated 
at the 4/5 level based on the center's success. Yet the person 
doing the work, me, was rated as average, a 3.
    This was a Bureau-wide problem confirmed by this result. 
Since the managers were in fact being rewarded for 
discriminating against me, they were believing they were 
retaliating against a Black male whistleblower, since 
criticisms like mine were apparently being reported to 
overseers by unknown persons, leaving my managers to guess it 
had to be me. That it was both discrimination and retaliation 
became evident after a while through the intensity of it.
    My few errors continued to be raised 2 or 3 years after 
their occurrence. Yet the errors that my managers continued to 
make every month, every week, or even daily were overlooked, 
excused, and ignored by others for them to continue to perform 
``field hand control functions.''
    Unfortunately, I was a charter member in the intake unit, 
which indeed came to be referred as ``the plantation.'' There, 
I personally witnessed and was the victim of racial 
discrimination by Black managers as well as others. The unit 
was dubbed ``the plantation'' because when we started, the 
majority of Black employees were assigned to intake, which was 
basically data entry.
    The one Caucasian man at the intake unit who demonstrated 
an interest in software testing was offered a permanent detail 
to another group which led to the creation of a new position 
for him. Someone then remarked that this looked like a ``damn 
plantation,'' and the nickname stuck.
    Thereafter, one of my former coworkers went to Consumer 
Response's management and asked why did they recruit him for an 
investigator's position, but when he arrived he was given a 
data entry job. Management responded by calling him into a room 
to berate him, curse him out, and denigrate his character.
    I witnessed this firsthand, Black managers denigrating a 
Black worker for, in effect, complaining about the 
discrimination. It deeply reinforced the plantation imagery.
    In fact, the extent of the adherence to this imagery became 
ludicrous. During plantation team meetings, management often 
volunteered to feed the team. But one day one of my team 
members remarked, this does not only look like a plantation, 
but they keep feeding us greasy fried chicken and pizza. He 
said if they are going to feed us, they should offer us some 
healthy food at least once in a while.
    I initially defended management until someone pointed out 
that we were a unit comprised entirely of Black employees 
standing around eating low-caste food, fried chicken, doing 
low-caste grunt work, the key attribute of being low caste, not 
receiving any respect.
    In addition, we did not have any career path. There wasn't 
a route we could take that would lead to a managerial position. 
If you were a Black employee on the plantation you were either 
a team lead or in the field. Not one team lead from my unit has 
ever been promoted to management.
    Rather than allow the plantation workers to compete for 
vacant leadership positions, my managers hired two White males 
to oversee us, one directly from the contact center vendor, the 
other from Booz-Allen Hamilton, the consulting firm that has 
been well-compensated by CFPB.
    I want to make this clear. The issue is not about those 
gentlemen's character. It is the process whereby they became 
managers. It perpetuates the narrative of Consumer Response 
Intake being the plantation.
    The plantation is where Black women and White men oversee a 
unit of Black employees who are never considered or groomed for 
management, despite their competitive qualifications. Bureau 
management excluded them from the outset as part of a strategy 
of domination and completely deprived them of any meaningful 
opportunity for advancement.
    If one exhibits too much merit or insight, one gets beaten 
down. The recognition of merit or insight, even when they are 
in the Bureau's interest, remains reserved for a few others to 
the injury of all of us depending on the Bureau to reform.
    I am responding to your question today while under 
subpoena. I am prepared to amplify upon the instances related 
above and furnish additional testimony to the committee upon 
its request.
    [The prepared statement of Mr. Williams can be found on 
page 45 of the appendix.]
    Chairman McHenry. I thank you both for coming forward. And 
I now recognize myself for 5 minutes for questions.
    Mr. Naraghi and Mr. Williams, I will just ask you both a 
couple of questions. Do you believe that you were discriminated 
and retaliated against at the Consumer Financial Protection 
    Mr. Williams. Yes.
    Mr. Naraghi. Yes.
    Chairman McHenry. Do you have reason to believe that other 
employees at the Bureau were discriminated against and 
retaliated against?
    Mr. Naraghi. Yes.
    Mr. Williams. Yes, sir.
    Chairman McHenry. To your knowledge, have any of your 
managers been fired or received formal sanctions for 
discriminating or retaliating against either of you?
    Mr. Naraghi. None that I am aware of, sir.
    Mr. Williams. No, sir.
    Chairman McHenry. Do you believe that the Director has to 
take action with managers and hold them responsible for 
creating this culture of retaliation/discrimination?
    Mr. Naraghi. Yes, I do.
    Mr. Williams. Yes, sir.
    Chairman McHenry. Do you believe the Director's continued 
reluctance to do that, to remove managers for discrimination/
retaliation against you, has emboldened other managers to do 
the very same thing that you experienced?
    Mr. Naraghi. I believe so. As a matter of fact, when the 
Director came out recently after Ms. Strong's testimony and 
defended her as a public servant and said that she didn't 
deserve to be treated that way by the committee, I saw that as 
insult and I had a lot of my colleagues contact me and 
encourage me to testify because they feel like nothing is going 
to change. It is just being ``whitewashed'' is the reference--
    Chairman McHenry. Thank you.
    Mr. Williams?
    Mr. Williams. Sir, managers were absolutely emboldened and 
empowered by the lack of response from executive leadership at 
CFPB. They did nothing. And the longer it takes for anyone to 
respond, the worse it will become.
    Chairman McHenry. Let me ask you, notwithstanding your 
experiences of being discriminated against and retaliated 
against, do you both still support the mission of the Consumer 
Financial Protection Bureau?
    Mr. Naraghi. Absolutely.
    Chairman McHenry. Mr. Williams?
    Mr. Williams. Absolutely, sir
    Chairman McHenry. Okay. All right. I just want to make sure 
that we have that on the record.
    Mr. Naraghi, you outlined that you had some serious 
concerns about the bank examination process. Just in short, 
what would the most serious problems be?
    Mr. Naraghi. The most serious as I see it, having had 
experience at the Fed overseeing corporate governance, and at 
the Federal Reserve Banks, as well as the large institutions, 
is that you have managers being put in charge of areas that 
they don't have expertise in. And that causes them to make 
wrong decisions. It is inefficient and ineffective.
    I can only speak about the Southeast Region. They have all 
the way up on top somebody who does not understand supervision 
banking at all. And then, he tends to hire folks who don't know 
much either. He tends to hire folks from his past experience--
    Chairman McHenry. Is it a lack of experience?
    Mr. Naraghi. It is lack of experience, lack of--
    Chairman McHenry. At that management level?
    Mr. Naraghi. At management level, a lack of experience, as 
well as a total insensitivity to basic labor laws or basic 
interpersonal skills.
    Chairman McHenry. Okay.
    Mr. Williams, about the call centers, we had questions this 
morning about personally identifiable information (PII) from 
consumers who call in. And did you centers do that, take 
personally identifiable information from consumers?
    Mr. Williams. Absolutely, sir. They would take it in what 
we could call a channel. A channel in the contact center world 
means the ways that you can communicate with the contact 
    If I call on the phone, that is one channel. If I send a 
letter, that is another channel. If I send a fax, it is another 
    So when a consumer would submit a complaint through any of 
the channels, it would have to contain PII so we could send it 
off to the bank so the bank could review the complaint.
    Chairman McHenry. Okay. Did consumers mistakenly receive 
other consumers' PII?
    Mr. Williams. It did happen, yes, sir.
    Chairman McHenry. And did you see a high number of those 
incidences relative to call volume and every--those channel 
    Mr. Williams. What I saw, sir, was an abnormal number. It 
wouldn't come consistently like we know there are 10 that are 
going to come every week, no. It would come in spurts.
    We might see three this week. We might see five. We might 
not see any for a few weeks. But then, it would sprout up 
    That is abnormal. You should not see that many in years. 
You should never see that type because there should be security 
measures and training in place to prevent this from happening.
    Chairman McHenry. Thank you both for coming forward.
    Mr. Cleaver is recognized for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman.
    Mr. Williams, you believe you have been discriminated 
    Mr. Williams. Yes, sir.
    Mr. Cleaver. On the basis of what?
    Mr. Williams. Same-race discrimination primarily, sir.
    Mr. Cleaver. On the basis of race.
    Mr. Williams. Some race, some gender, sir, primarily. Would 
you like me to expound, sir?
    Mr. Cleaver. Especially the gender part.
    Mr. Williams. Yes, sir. My quality assurance manager and 
section chief seemed to have an issue with African-American 
males. And it was an obvious issue that they had.
    I can give you an example of at a certain point before I 
left, sir, the work for the quality assurance was done 
primarily by two African-American males, myself and another. 
Both of us at the behest of my quality assurance manager were 
placed on performance improvement plans. Both of us were 
scrutinized and we received negative marks on our performance 
review. This did not occur to the other gentleman who was not 
African-American in our unit.
    Mr. Cleaver. Okay. I get it.
    Now, on Page 2 of your statement, I am a little confused: 
``If my managers had been White instead of Black managers every 
civil rights organization in America would have protested my 
    Mr. Williams. Yes, sir. Because they were Black women, 
people don't seem to understand that discrimination can happen 
inter-race. You don't have to be White to discriminate against 
a Black person or vice versa. They discriminated against me, 
and we are the same race, the same ethnic group.
    Mr. Cleaver. So they were discriminating against you on the 
basis of what?
    Mr. Williams. Race. I would say race and gender. The reason 
    Mr. Cleaver. You just--okay.
    Yes. I did the commencement at law school. I am not a 
lawyer. My commencement was really good, but my address--so I 
don't--you know I don't--here is my--you are saying they 
discriminated against you. These are Black men who 
discriminated against you because you were Black.
    Mr. Williams. Please--
    Mr. Cleaver. Well, that is what you said. You said you had 
Black managers. I asked if they discriminated against you and 
you said yes. And I said why and you said race and gender.
    Mr. Williams. Yes.
    Mr. Cleaver. So the Black people didn't like you because 
you were Black.
    Mr. Williams. Yes, sir. They devalued our work. It is the 
same thing that the Deloitte report alluded to. The same thing 
the Defense Investigators Group alluded to. They devalued our 
work. It wasn't treated the same.
    Mr. Cleaver. Okay.
    So this is to both of you. I am really confused. I have a 
headache. But this is the reason we shouldn't be involved in 
this. What would you like for Congress to do?
    Mr. Williams. Are you asking me, sir?
    Mr. Cleaver. Both of you.
    Mr. Naraghi. I think that--
    Mr. Cleaver. That we have the capacity and power to do.
    Mr. Naraghi. Yes, sir. In my opinion, given the way that I 
have observed the Southeast Region management as being 
unaccountable for, I think that at the examiner level they 
could still use some supervision and basically some sort of 
repercussion. Because right now each division--each Regional 
Director runs it like a fiefdom without any recourse for the 
    Mr. Cleaver. So you want Congress to do what?
    Mr. Naraghi. To provide some sort of an oversight or 
something. Put in place some sort of accountability, if you 
will, for middle management and top management of CFPB so such 
things don't come to the level of explosion that you are seeing 
most of me and my colleagues are having to come to Congress to 
seek justice.
    Mr. Cleaver. But does not the EEOC provide that legal 
opportunity for redress?
    Mr. Naraghi. Here is the thing, sir. I filed the EEO case, 
okay. And it took them a year-and-a-half to do the 
    Mr. Cleaver. Then, that is Congress' fault because we are 
not funding EEOC adequately to reduce the caseload. You are 
absolutely right. It is that way all over the country.
    So you are saying you want Congress to approve more money--
    Mr. Naraghi. No.
    Mr. Cleaver. --for the EEOC?
    Mr. Naraghi. I am saying, for example, Ms. Liza Strong runs 
that office without any limits, without anybody overseeing her. 
What she says goes. And that is--
    Mr. Cleaver. I hate to cut you off. So what you want us to 
do is to get all the people who said they have been 
discriminated against and bring them before this committee and 
then do some kind of congressional something that I don't know 
    Mr. Naraghi. No, sir. That is not what I am suggesting.
    Mr. Cleaver. My time has run out. Thank you.
    Chairman McHenry. I am willing to let that--
    Mr. Cleaver. I just want somebody to tell me very precisely 
what you want Congress to do.
    Mr. Naraghi. I think that CFPB management needs to have 
some sort of oversight in order to--and what do I mean by that? 
I mean that there should be some sort of accountability for the 
management of the CFPB. Because right now, when I complain 
about a Director, he goes up to his boss. And there is no 
accountability. I have appealed the case unrelated to EEO, 
unrelated to what I am here, what I have testified about, since 
Christmas of last year.
    Chairman McHenry. Okay.
    Mr. Naraghi. It has been pending. There is no recourse--
    Chairman McHenry. Mr. Williams, we will give you an 
opportunity to answer the same question if you wish.
    Mr. Williams. I would like Congress to come in because you 
have the ability to level the playing field through your power. 
Disparate treatment, we talk about the disparate impact at CFPB 
about banks and their impact upon consumers. You are having 
Federal employees experience disparate impact.
    Congress can authorize an investigation by an investigator 
that is unrelated to the CFPB, an independent to come in that 
has oversight authority. That is an option.
    Chairman McHenry. Okay.
    We will now go to Mr. Fincher of Tennessee.
    Mr. Fincher. Thank you. Thank you, Mr. Chairman.
    And just to respond to the gentleman from Missouri, I think 
the budget is unlimited. I don't--well, we don't have authority 
in this committee over the budget. So, I don't think it is the 
money issue that is the reason why they can't--
    Chairman McHenry. If the gentleman will suspend.
    And just to address this, internally, the Office of Human 
Capital has resources to deal with this matter. And if it is 
not dealt with internally at the Bureau, my understanding of 
the operation of the law is that you can then have a hearing 
adjudicated in a formal EEOC process for remedy if the Bureau 
doesn't handle it internally.
    So the question of internally, that capacity is unlimited. 
The question is that budget. And Mr. Cleaver is indeed correct 
on that. But Mr. Fincher is also indeed correct. Internally, 
they have an enormous capacity to do this.
    Mr. Green, if you wish to--
    Mr. Green. I would only add, Mr. Chairman, that--
    Chairman McHenry. And I just ask unanimous consent that 
this does not affect Mr. Fincher's time.
    Mr. Fincher. Thank you.
    Mr. Green. I would agree that it should not impact his 
time. But I would also agree that Mr. Cleaver's statement was 
with reference to the EEOC itself and its budgetary concerns, 
which are without the purview of the CFPB.
    Chairman McHenry. Yes. And I appreciate that. And I would 
agree with my colleagues that the budget needs to be remedied 
to deal with that capacity.
    I would ask unanimous consent to--
    Mr. Green. Mr. Chairman, if I may, would the gentleman 
yield? If you are agreeing with your colleagues, you are not 
agreeing with the colleagues on this side, for the most part. 
When you said you agree with your colleagues that budget should 
be remedied, are you talking about the EEOC budget?
    Chairman McHenry. Both the CFPB and the EEOC process, but 
in very different ways.
    Mr. Green. With reference to the EEOC, we are in agreement.
    Chairman McHenry. Thank you.
    I ask unanimous consent to return Mr. Fincher to 5 full 
minutes for his questioning. And I appreciate the witnesses' 
indulgence on that.
    Mr. Fincher. Thank you, Mr. Chairman. I appreciate my 
colleagues from that side of the aisle responding.
    Mr. Naraghi, after filing your EEO complaint in May 2012, 
you went through what you describe in your testimony as a 
living hell. You also describe in your testimony that the 
retaliation against you by CFPB managers has continued. Can you 
describe what has occurred to you since 2012?
    Mr. Naraghi. Since 2014 or--I am not sure I understand 
since what date?
    Mr. Fincher. Since 2012.
    Mr. Naraghi. Yes. Besides what I enumerated, basically I 
was blackballed. The assignments that they were giving me are 
basically not utilizing my years of experience and expertise.
    Minor things like almost I would say childish: cancelling a 
vacation that was already approved when my wife and kids had to 
go on vacation without me because they basically took back my 
approved vacation; being accused of falling asleep in a meeting 
when that wasn't the fact. The worse thing is giving me--
    Mr. Fincher. So you put in for a vacation but you were not 
allowed to take the vacation?
    Mr. Naraghi. Yes, sir.
    Mr. Fincher. Wow.
    Mr. Naraghi. They approved it. My manager approved it. But 
it was right at the time where I mentioned Mr. Uberu had 
problems with me. And as a result of that, one of my 
punishments was they rejected--they said we need you at the 
    And yet, this is what is funny. They criticized my work on 
the exam. And I said if you are not happy with my work, because 
remember I was chastised for not filing an issue after looking 
at those, but yet you have canceled my vacation. And they said 
that is beyond your pay grade decision. You do what we tell 
    If they had the retaliation and retribution I am talking 
about is little, big. However they can come at you, they will.
    That is why I don't want to--what the biggest retaliation, 
sir, was when I was right when a colleague at the time said 
that he was worried about me having a heart attack because of 
the mistreatment I was getting from these gentlemen.
    And then getting all 1s that means you can barely--you are 
alive. Basically, 1s means you--and you have to remember. Look 
at me for 14 years at the Federal Reserve. I have done cash 
overs. I have performed well. And all of a sudden I come to the 
CFPB and the first 6 months I am commendable. Then--
    Mr. Fincher. The job before this job, where did you work 
    Mr. Naraghi. I worked at the Federal Reserve Board in 
Washington, D.C.
    Mr. Fincher. And before that?
    Mr. Naraghi. Before that, I worked at Mayor International 
as a national accountant.
    Mr. Fincher. Have you ever been treated this way in any job 
ever in your life?
    Mr. Naraghi. No, sir. And I lived in Mississippi for 5 
    Mr. Fincher. Okay--
    Mr. Naraghi. No, I have encountered, like the gentleman 
said, I have encountered racism, being called horrible names. 
It has never been, never, ever like this kind of--and 
especially because you expect not only is the government 
entity, you are working with professionals. You expect more, 
more than this kind of childish, boorish behavior, in my 
    Mr. Fincher. Thank you.
    Mr. Williams, do you think there is a path out of the 
intake division for employees who work there?
    Mr. Williams. After your last hearing, there is now. 
Initially, no. I wrote the training program. One of my 
contracts as a contract officer representative, I got with a 
vendor and I was responsible for the training for two to three 
divisions of the entire agency.
    I had that vendor contract. I designed a training program 
with our training coordinator, presented it to a few section 
chiefs, and it was flat out rejected.
    I explained to them how a person in intake could have been 
trained to go over to investigations. They have the building 
experience. They have been at the agency. So you don't have to 
orientate them to the mission. They are there.
    So if you were not one of the section chief's favorites, if 
she did not care for you, you were not getting out of intake. 
They made sure if they did not like you--if you were one of 
their favorites, they would find you a detail. They would do 
something special.
    Suddenly, that detail is going to become a permanent job. 
And guess who is the greatest candidate, you. This is how they 
would operate.
    Mr. Fincher. My time is almost expired. But we all are 
Members of Congress. The buck stops with us and representing 
our districts.
    Whether we like it or not, Mr. Cordray is head of this 
agency. And there are some accountability problems here. And 
hopefully, we will get to the bottom of it. I appreciate you 
both coming in.
    I yield back.
    Chairman McHenry. The gentleman from Nevada, Mr. Horsford, 
is recognized for 5 minutes.
    Mr. Horsford. Thank you very much, Mr. Chairman.
    And I want to say in the outset, I know this is a hearing 
that we have had on this issue now several times. And I think 
it is important for us to state at the outset that an unfair 
discriminatory workplace for any individual, regardless of 
their background, race, gender, or sexual orientation should 
not be tolerated, period. Whether it is at the CFPB or any 
Federal agency or private agency it is not part of what we 
expect in the workplace in the 21st Century.
    I have listened to your testimony and the testimony of 
individuals who have come before this subcommittee, and I 
continue to be troubled by the allegations of discrimination. 
And I want to be able to hear from you about those concerns and 
your suggestions for what should be changed.
    I also want to say that I think we need to focus on how we 
address these issues from a systemic point of view. That 
sometimes hearing the testimony of, in this case two 
individuals, and then to make decisions about an entire agency, 
I think is problematic. But since you are here, I do want to 
hear your suggestions.
    So, Mr. Naraghi--
    Mr. Naraghi. Naraghi.
    Mr. Horsford. Naraghi. Thank you. And Mr. Williams, after 
listening to your testimony throughout this hearing and reading 
your full written testimony, beyond the issues that you have 
already raised, what specific suggestions or changes do you 
have that would help improve the work culture of the Bureau?
    Mr. Naraghi. I would suggest there has to be some sort of 
mechanism. If this subcommittee had not formed this I would 
have no recourse because I genuinely as a naturalized U.S. 
citizen and as somebody, who like any other person, loves his 
country and obeys the law, I followed all the rules.
    I asked the Human Capital Officer at the CFPB to let me 
know what I can do. I went through the protocol. At every turn 
I was turned down, sir. And I filed an EEO case and I am 
waiting. If this hadn't happened, I probably would be looking 
for another job--
    Mr. Horsford. If what hadn't happened?
    Mr. Naraghi. This subcommittee had not formed this--
    Mr. Horsford. But what do you expect out of this 
subcommittee? Because I haven't heard anything from--
    Mr. Naraghi. All I am trying to do--
    Mr. Horsford. --the other side on what they plan to do. 
Other than hearing your testimony and hearing the allegations. 
That doesn't fix the problem that the employees of the Bureau 
are facing. So what is it that you want to come from this 
    Mr. Naraghi. I, as I am here to speak for myself. I am 
hoping by bringing this to your attention, to the Nation's 
attention and CFPB senior management's attention that they 
seriously try to fix it because everybody that I have come 
across, everybody I have had the honor to work for loves their 
job. They want to help consumers. Nobody--and this is 
interfering. This mismanagement--
    Mr. Horsford. Okay. Mr. Williams?
    Mr. Naraghi. --that we are suffering is interfering with 
    Mr. Williams. As stated, sir, I appreciate the question. 
There should be an independent investigator coming from this 
committee. Congress has the ability to assign to leverage the 
playing field. You have the ability of oversight and to 
eliminate the disparate impact that employees are facing.
    So that is my suggestion, an investigator. Someone without 
connection to the agency to come in, not the Office of Minority 
and Women Inclusion (OMWI), but someone from the outside to 
come in and look at what has happened. Take the report 
    You shouldn't have to come back here every couple of months 
and hear the same story from a neverending--from a cavalcade of 
current or former employees.
    Mr. Horsford. And that is part of my concern, quite 
honestly, is at what point, Mr. Chairman, do we intend to 
actually propose recommended steps based on the testimony that 
we have heard from witnesses? It is not doing them any good to 
continue to have hearings where we just hear the allegations 
and aren't acting to address it.
    I, for one, and I know the ranking member and other members 
on this committee want to get to the point where we are fixing 
this. Not just for the CFPB, but for any agency where 
discrimination exists. And so, can I ask that of you and the 
full committee as to when we will get to that point in the 
    Chairman McHenry. Just as a subcommittee chair, and I 
appreciate the gentleman yielding in the spirit he is asking 
the question, I have not drawn any conclusions yet. I want to 
get to the bottom of what this is, if it is truly a structural 
    That is why my questions this morning to Mr. Cordray were 
about what actions he has taken on the people whose 
subordinates have been awarded a settlement for the manager's 
discrimination. Yet that manager still receives high marks, 
promotions, and bonuses. That is problematic.
    And so, I have gone into this with an open mind. And I 
certainly appreciate my colleagues on this committee coming 
with the same sentiment. I haven't come to the conclusion yet. 
But I do think that accountability is a measure.
    And to Mr. Williams' point when he said that--you said that 
after the last hearing, there was a change. Apparently, the 
agency is listening. I don't know to what degree.
    And I am sorry to take up so much of your time, but--
    Mr. Horsford. No. I appreciate it, Mr. Chairman. I guess 
beyond having hearings though, that to me is not really 
addressing the problem.
    We have the report. The issues were exposed. The ranking 
member told you from day one that discrimination exists. So 
what are we going to do to fix this?
    Chairman McHenry. And I would be happy to work with the 
gentleman on solutions.
    Mr. Horsford. Thank you, Mr. Chairman.
    Chairman McHenry. I certainly appreciate it.
    We will now go to Mrs. Wagner, the gentlelady from 
Missouri, for 5 minutes.
    Mrs. Wagner. Thank you, Mr. Chairman. I appreciate it. And 
I certainly thank our witnesses for their bravery in coming 
forward and testifying.
    I would also remind this subcommittee that we did have a 
CFPB markup just last week. And I had the pleasure of speaking 
on behalf of the Stivers bill that asked and called for--it 
passed out of full committee--an independent IG that is outside 
of the purview of the Fed. I think that is one of many things 
that we can be looking at. But that actually is something that 
passed out of this committee, and I hope it will make it to the 
full Floor.
    I have to tell you, one of the most stunning things that I 
have seen, and I have just read through this letter from the 
attorney of Ms. Liza Strong, who is again the Lead of Employee 
Relations for the CFPB. And she has sought to strike and bar 
the opening statements of employees, specifically Mr. Naraghi.
    I have to tell you the arrogance, hubris, the doubling down 
of humiliation and retaliation is absolutely unconscionable. We 
do need reforms. We do need transparency. We do need 
accountability, oversight, power of the purse, all of the 
    I will get to my questions here.
    Mr. Williams, you state in your testimony that you were the 
Quality Assurance Monitor at the Office of Consumer Response. 
In that role, you found problems with certain aspects of the 
program that were ineffective or inadequate or flawed. Did you 
ever raise these problems with anyone at the CFPB?
    Mr. Williams. Absolutely, ma'am. I raised them on numerous 
    Mrs. Wagner. Did you ever raise these problems to the 
CFPB's Inspector General?
    Mr. Williams. No, ma'am.
    Mrs. Wagner. Did you ever get the sense that your managers 
at the CFPB thought that you had complained to the CFPB's IG?
    Mr. Williams. Yes, ma'am. They misidentified me as a 
    Mrs. Wagner. What made you think that?
    Mr. Williams. One, the intensity of the scrutiny I faced, 
and in a confidential manner it was revealed to me that I was 
misidentified as the whistleblower.
    Mrs. Wagner. How did your managers find out that an 
employee had complained to the CFPB's Inspector General?
    Mr. Williams. Someone in the IG's office--somehow this got 
leaked out to CFPB management. It was leaked out to not just 
executive leadership, but especially to Consumer Response.
    Mrs. Wagner. From the IG's office, Mr. Williams?
    Mr. Williams. It had to be, yes, ma'am.
    Mrs. Wagner. Do you believe that your managers retaliated 
against you for being a whistleblower even though you were not?
    Mr. Williams. Yes, ma'am, every day they could.
    Mrs. Wagner. And why is that?
    Mr. Williams. Because they were bullies, plain and simple. 
I don't have any big words for it. They were bullies.
    They were untrained. None of us were prepared for the 
enormity of the--me included. None of us were prepared to 
launch a Federal investigation under these circumstances and 
put together a major contact center. I, at least, knew we 
weren't prepared.
    Mrs. Wagner. Let me ask a question here. Has the CFPB hired 
any new African-American managers to work in the Office of 
Consumer Response?
    Mr. Williams. No, ma'am.
    Mrs. Wagner. Is there any fathomable explanation for why 
the CFPB has failed to recruit new African-American managers in 
the Office of Consumer Response?
    Mr. Williams. The current administration there, ma'am, is 
the answer. When you change the current administration, it 
might change the climate. But they have infused--there are so 
many of their cronies in Consumer Response that you are still 
going to have the roots of that there.
    So you have to change the whole scheme. And that might get 
some results.
    Mrs. Wagner. Thank you, Mr. Williams.
    Mr. Naraghi, is it true that you shared your concerns about 
the favoritism and the mismanagement with the CFPB's Inspector 
General in 2012?
    Mr. Naraghi. Yes, ma'am.
    Mrs. Wagner. How did the CFPB's Inspector General react to 
your concern?
    Mr. Naraghi. In my initial call, I was pleasantly 
surprised. I was immediately contacted. And they saw to get 
my--not only about my mistreatment, which they recommended for 
me to seek EEO help, but they asked me to let them know. And 
the main reason I called them is because I was concerned about 
my responsibility as a government employee to report any misuse 
of funds.
    And after I sent them the email enumerating what I thought 
were wrongdoings, I never heard back from them.
    Mrs. Wagner. You never heard back--
    Mr. Naraghi. No, ma'am.
    Mrs. Wagner. --from the IG?
    Has the CFPB's Inspector General in any way been helpful to 
you in increasing transparency or accountability for 
mismanagement to CFPB?
    Mr. Naraghi. Not that has been apparent to me.
    Mrs. Wagner. I thank you, Mr. Chairman. I will yield back.
    Chairman McHenry. I appreciate the gentlelady yielding 
back. We will now recognize the vice chairman of the 
subcommittee, Mr. Fitzpatrick of Pennsylvania.
    Mr. Fitzpatrick. I thank the chairman. And I also thank Mr. 
Naraghi and Mr. Williams for your courage in coming forward to 
this committee like Angela Martin and other employees before 
you. It takes a great amount of fortitude and courage to come 
to the committee to make the statements you have made.
    We understand that there are several employees back at the 
Bureau, dozens if not more, who for a variety of reasons don't 
feel capable to come forward and give their statements. We have 
seen some anonymous statements. But you are giving them a voice 
as well and that is also an important role that you are playing 
and service that you are giving to the Bureau and to your 
fellow employees.
    Mr. Naraghi, you indicated in your written statement that 
you found that voicing professional dissenting opinion would 
ultimately in many cases result in retaliation. You give a 
number of examples.
    For instance, one was when you were pointing out 
inefficient use of Bureau resources, the wasting of Federal tax 
dollars. You talked about it in terms of sending reviewers or 
inspectors to cities where there were qualified individuals 
already there, and significant travel expense and things along 
those lines. And I am sure there are many examples.
    Did you guys at the Bureau ever engage in video 
teleconferencing to try to save dollars?
    Mr. Naraghi. No. You have to remember the exam group that I 
belong to that is in a part under supervision has hardly 
besides their--the senior management of the area, we work out 
of our homes. Seventy percent to 80 percent of the time we are 
on travel, so which means we are at the institution site.
    And no, to the--they may use it at the headquarters, but I 
am not aware of it.
    Mr. Fitzpatrick. You never used video teleconferencing in 
order to save the Bureau dollars? And you are suggesting that 
you actually pointed out wasteful use of Bureau resources and 
were retaliated against for doing so?
    Mr. Naraghi. That is true.
    Mr. Fitzpatrick. Now, we were interrupted a little bit by 
some votes on the Floor. So I didn't see your entire opening 
statement. But I understand that there was a cultural slur that 
you referred to in your opening statement. What was that?
    Mr. Naraghi. ``F'ing foreigner'' is how my field manager 
used to refer to me. It wasn't in my presence. And it was at 
the huddle.
    Each region has three huddles, what they call it. Three 
times a year they get all the examiners together. And in this 
particular one they had hired some new examiner that my manager 
did not know, had not met. And on the elevator this new 
examiner heard him refer to me in those terms.
    Mr. Fitzpatrick. What did the CFPB relations, employee 
relations and the Equal Employment Opportunity office, what did 
they do when you brought that to their attention?
    Mr. Naraghi. I talked to Liza Strong and she said oh, 
absolutely we don't tolerate that. But, like the gentleman 
said, there are always two sides. I was promised there would be 
investigation. I never heard back from them.
    I brought that to the investigator's attention and she is 
the one who actually made a note of it. And management in their 
interview by the investigator said oh, we don't know what he is 
talking about, basically denial.
    But I did find out last night, late last night the 
president of our union called me and he said that they have 
actually started an examination or investigation into that just 
    Mr. Fitzpatrick. So it sounds like you brought it to their 
attention on multiple occasions. When we review 
inappropriateness, we are looking for a timely response and an 
appropriate response. You are saying just last night you were 
advised that they will now look into it?
    Mr. Naraghi. That they have just started the investigation, 
yes, sir.
    Mr. Fitzpatrick. Mr. Williams, is racial discrimination 
within the Office of Consumer Response widespread, in your 
    Mr. Williams. It is concentrated in one area that I can 
attest to. I would imagine that it exists. But I can tell you 
that it is concentrated in one area.
    Mr. Fitzpatrick. Did you witness favoritism in hiring at 
the CFPB?
    Mr. Williams. Absolutely. Yes, sir.
    Mr. Fitzpatrick. Can you describe it to us?
    Mr. Williams. So I am your friend, and I need a job. Well, 
lo and behold, out of the millions or thousands of people who 
may apply, we are going to pick you. Then, after you are there 
6 to 8 months, you need a promotion. So if it is not on the org 
chart, I will create it.
    So then, I have brought you on. You don't have any tenure. 
The agency is only 3 years old. Now, I have hired you. I am 
going to give you six figures. And now I am going to reward you 
with a team lead position that you are just not qualified for, 
but don't worry about it because I will deflect any criticism.
    Mr. Fitzpatrick. My time has expired. Thank you, Mr. 
    Chairman McHenry. I appreciate that. Thank you, Mr. Vice 
    Mr. Hultgren of Illinois is recognized.
    Mr. Hultgren. Thank you, Mr. Chairman. And I thank you both 
so much for being here.
    First, I want to ask Mr. Naraghi a couple of questions. 
What happened after you filed your first formal EEO complaint?
    Mr. Naraghi. Immediately afterwards, I was issued a 
reprimand letter.
    Mr. Hultgren. Did you construe the letter of reprimand that 
you received shortly after filing your EEO complaint as an act 
of retaliation?
    Mr. Naraghi. I believe so.
    Mr. Hultgren. Have you experienced any additional instances 
of retaliation?
    Mr. Naraghi. Absolutely.
    Mr. Hultgren. Can you tell me about that?
    Mr. Naraghi. Absolutely. I have a huge list. I think the 
committee wouldn't have enough time. But I can give you a few 
    The biggest retaliation is I was given a bad grade for an 
exam where I was doing my job, in other words, telling my 
inexperienced manager that what he was telling the institution 
was wrong, in a polite, professional manner. That was when they 
cancelled my vacation, wrote a bad evaluation for me, and gave 
me all 1s despite my work being satisfactory.
    And they also denied me a raise. So, I had started in 2011, 
and I didn't get a raise until 2013. And that affects not only 
obviously my pay, but any opportunity because it took me a year 
to prove them wrong. And it took me seeking a different 
    One of the practices--it may be true across the CFPB but I 
can only speak to us, the Southeast Region--is if anybody makes 
a complaint about racism or discrimination, they put them under 
a minority manager thinking that--they did that to me. The 
gentleman who had made a reference to me as a ``F'ing 
foreigner,'' I had to call Ms. Strong 3 or 4 times, and send 
several emails seeking to have another manager who could be 
    After a few months, they assigned me to an African-American 
manager, in their mind thinking well, the African-American 
manager cannot be biased because he is a person of color. Do 
you know what I am saying? I think they may be under some sort 
of a misunderstanding that like he was saying, colored people 
do discriminate against colored people as well.
    Mr. Hultgren. Mr. Williams, can you elaborate on how other 
African-Americans have faced racial discrimination within the 
Office of Consumer Response?
    Mr. Williams. Well, the assignments. In Consumer Response, 
and specifically in intake, if you were not someone that they 
favored, your work is not only going to be intensely 
scrutinized, they are going to send you constant emails about 
the rate of work that you are producing. Why didn't you finish 
this? Do you see how many you have? And they would do that 
    I can speak from my experience--my quality assurance 
manager and section chief were waiting until 5 o'clock, and 
they would have a write up or something. Or in one instance 
they created a policy that probably doesn't exist, and wrote me 
up. I took it to Liza Strong, gave her the document, and said 
that we don't even think this policy ever existed. She said, 
okay. It was really nice, a pleasure, but she did absolutely 
    I took it to her personally, called her on the phone, said 
here are the documents, Liza Strong. Can you show me where this 
policy exists? They have never done it. I even showed her that 
if this policy exists, the vendor is doing the same thing. So 
you are going to tell me that your vendor is violating the same 
policy? They have never answered that. So those are examples.
    Mr. Hultgren. My time is going by quickly, so I want to ask 
you just a couple more questions to both of you.
    Do you believe that the CFPB is hypocritical in how it 
addresses its internal discrimination? If so, why do you 
believe this?
    Mr. Williams. Absolutely, sir, because I am the only person 
who has ever been punished. They didn't renew my contract. The 
rest of them have all been promoted and have gotten raises. I 
am the one who had to go out and seek other employment.
    Mr. Naraghi. I am aware of--not to myself because I came 
from the Federal Reserve and competitively took my position--
colleagues who were brought over on contract whether from the 
OCC or other agencies. These are people of color, different 
nationality, origin. And CFPB management has refused to make 
them permanent employees, even though I have had the privilege 
of working with them and they are very capable examiners.
    However, there are White examiners who have been made into 
permanent employees. So even though I wasn't subject to it, I 
am aware of it, and I have seen folks like that.
    Mr. Hultgren. My time has expired. I yield back, Mr. 
    Thank you both.
    Chairman McHenry. I thank my colleague. We will now go to 
Mr. Duffy of Wisconsin.
    Mr. Duffy. Thank you, Mr. Chairman.
    Listen, I first want to thank the panel for their testimony 
today. I know it is not easy to stand up and walk forward and 
be the voice for many in your organization, in the Bureau who 
don't feel they can stand up and tell these stories. And I 
think everyone on this committee has bipartisan recognition of 
how difficult it is to actually come forward because the light 
shines that much brighter on you when you do it. And so, I 
thank you for your courage in coming forward.
    In that regard, has it been a pleasurable experience coming 
forward and testifying before Congress for the both of you? Mr. 
    Mr. Naraghi. It has. To me, it is like a huge weight has 
been lifted off my shoulder. I was beginning to doubt myself 
because every complaint or everything I brought to management's 
attention has been just denied like it is a figment of my 
imagination. And I am seeing that people listen, and say, no, 
you are right to have taken it that way.
    I feel like a huge weight has been lifted off my shoulders. 
So, it has been pleasurable.
    Mr. Duffy. Good.
    Mr. Naraghi. Thank you.
    Mr. Duffy. Mr. Williams?
    Mr. Williams. No, sir. The only thing I wanted to do was 
    Mr. Duffy. That is right.
    Mr. Williams. They took my job that I started that unit. 
No, this isn't pleasurable, I am getting scrutinized. This is 
on the internet. I don't want to be here. Who in their right 
mind wants to come up here? No, I don't want to be here.
    Mr. Duffy. And that is what I actually thought the answer 
would be, and not a weight being lifted off. It is not 
pleasurable. It is difficult to come forward and to expose what 
is going on. And again, Mr. Williams, I am grateful for your 
willingness to step forward.
    When you were telling your stories about the racism, the 
language that I won't even repeat, it was being used against 
the both of you. Did you see a lot of people rally to your aid, 
step up and say, it is 2014, listen, at this new agency, that 
is not acceptable. We are going to stand by you. We are going 
to fight for you and we are going to root this out.
    Mr. Naraghi. I speak about my own. It was a colleague who 
saw or overheard what happened and was disturbed by it. And he 
since then has actually quit the Bureau. He was already unhappy 
for sitting at home. Once he heard this, it was kind of a last 
nail in the coffin for him.
    And as far as other folks, they are afraid to speak up. It 
is a really sick environment that we work in. So folks, I don't 
expect them--the only one that I referred to in my testimony, 
brave because he was brave because management knew who he was. 
He even gave me authority to use his name in appealing my 
evaluation. He is truly my hero and he is truly a straight 
    Mr. Duffy. Thank you.
    Mr. Williams?
    Mr. Williams. Every member of management from the chief 
operating officer down to Liza Strong lied to me and the 
National Treasury Employees Union. Employees wanted to rally 
openly, but they know that there is a retaliatory environment. 
I was the only one that CFPB Consumer Response management could 
retaliate against because they refused to make me a permanent 
    So there is a different hurdle. There is no hurdle to 
retaliate against me. Every member of leadership lied to me or 
the union directly. So they did nothing for me.
    Mr. Duffy. I say this with some reservation. To the ranking 
member's comments about making sure we do a full investigation, 
I agree with that. And to his comments of his experience of 
racism, I can't imagine the pain. And we had a culture that did 
behave and still does behave that way.
    But I imagine when someone has two drinking fountains, 
there is no investigation. When you see it, you know it, and 
that is racism. When we hear the language that has been used, 
when we read the investigations that have been put together 
from the outside looking in, yes, we can investigate a little 
bit more. But I am telling you what. If it walks like a duck 
and it quacks like a duck, I am telling you it is a duck.
    And so I promise that this committee will continue to 
expose what has happened. I know we are going to have a 
bipartisan buy-in to make sure that we root it out, and you 
both can have a work environment that is consistent with the 
skills and mission and drive that you bring to consumer 
protection. I promise you that.
    I yield back.
    Chairman McHenry. The Chair now recognizes Mr. Rothfus from 
Pennsylvania for 5 minutes.
    Mr. Rothfus. Thank you, Mr. Chairman. And let me echo the 
sentiment of my colleagues in commending you for the fortitude 
to come here today to tell your story.
    Mr. Naraghi, in your prepared testimony you addressed the 
issue of the risk model that CFPB uses in its supervisory 
program. Could you explain what a risk model is and why it is 
significant in bank exams?
    Mr. Naraghi. A risk model is--essentially you should think 
of it in a basic term--is a measuring stick that you use 
against all institutions. It is a model that you assess what 
are the critical functions of a given institution and what are 
the tolerance levels of that. It is basically defined therefore 
you are going to an institution.
    When you don't have a risk model we go through a--
institution A versus institution B. And let's say we find 10 
issues in A and only 5 in B, and we rate A higher than B. There 
is nothing to back up whether or not you have been subjective 
or objective in determining it.
    However, if there is a measuring stick that you hold 
against both institutions, then you have done a fair job and 
your question can be--your assessment can be reviewed and 
confirmed by folks who may not be experts in that area. But 
they can see that you treated both of them fairly.
    Mr. Rothfus. So in your tenure at CFPB, have you had to 
conduct exams without a risk model in place?
    Mr. Naraghi. Yes, sir.
    Mr. Rothfus. When did the CFPB ultimately adopt a risk 
    Mr. Naraghi. They issued a--for mortgage servicing, they 
issued a manual. I believe it was in the first part of 2012. I 
am not sure about the day. And then later on, by the end of 
2012, we got a comprehensive examination manual, which they are 
having also serve as a risk model.
    Mr. Rothfus. And that was by the end of 2012, you said?
    Mr. Naraghi. Yes. The most recent one was reissued because 
of the new regulations at the beginning of this year. But we 
have had one since 2012.
    Mr. Rothfus. How did you evaluate banks without having a 
risk model?
    Mr. Naraghi. I relied--basically, we had nothing to go by. 
And as far as my assignment was concerned, I led the 
examination of mortgage servicing. But I based basically my 
directive the staff or examiners that I was working with to go 
through what I recall from proper examination techniques from 
the Fed. Because I have about 20 years of experience in 
conducting examinations.
    Mr. Rothfus. Do you have any concerns regarding the CFPB's 
2012 supervision manual? For example, does this model align 
with actual exam practices?
    Mr. Naraghi. There are a lot of problems to be worked out. 
In my opinion, what they have done is they had lawyers write 
advisory information, which is the information the bank or 
financial institution or nonbank provides us, and then we got 
the manual. They don't tie in. They are not in parallel. So, 
there are a lot of issues.
    And the manual was written, again, by attorneys. It is not 
what we normally do in a supervisory entity because it doesn't 
give enough. It just says ask for such and such information and 
    It doesn't tell the examiner, especially because more than 
half of the examiners at the CFPB are inexperienced folks. They 
have expertise in the industry, but this is their first time 
doing examinations. I think it is critical for them to know 
what you are assessing and how do you go about assessing that 
particular function.
    Mr. Rothfus. Mr. Williams, during your time at CFPB, how 
did CFPB define a breach of personally identifiable 
    Mr. Williams. We would file a PII breach. You could find 
them a couple of different ways. One, during a quality 
assurance evaluation of one of the monitors, we might find 
them. The other way, if the vendor self-reported or if the 
consumer contacted, as they did some vendors, I think.
    Some consumers contacted the New York Times at one point 
concerning three breaches. But those are the three typical ways 
you find them.
    Mr. Rothfus. How often did breaches of PII occur at the 
CFPB call center?
    Mr. Williams. It occurred frequently but there wasn't a 
pattern. You would see it might happen, as I stated earlier, it 
might happen 3 times and then you don't see it for a while. 
Then all of a sudden, you see it again.
    Mr. Rothfus. In your opinion, was the number of PII 
breaches and incidents high, low or about normal for a call 
    Mr. Williams. It was high.
    Mr. Rothfus. In your view, would there be fewer incidents 
in breaches of PII if the Office of Consumer Response had more 
experienced managers?
    Mr. Williams. Absolutely.
    Mr. Rothfus. Thank you. Thank you, gentlemen.
    I yield back.
    Mr. Fitzpatrick [presiding]. The Chair now recognizes the 
ranking member of the subcommittee, Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. And I must say, if I 
may in passing, that you look good in that seat.
    If I may, Mr. Williams, I make notes and I go back through 
my notes to provide some degree of clarity. So let's start with 
a statement that you made, only to provide clarity, Mr. 
Williams, I assure you. You indicated that while under subpoena 
today, you were making certain statements.
    And to provide clarity, I want to make sure you understand, 
and I believe you do, that you are under subpoena today because 
you requested a subpoena. The committee would have allowed you 
to come without subpoena. But it was at your request that we 
issued a subpoena. Are you aware of this?
    Mr. Williams. I am aware of that.
    Mr. Green. Okay. Let me go to my next point.
    You indicated something about organizations that would be 
assisting you if certain circumstances existed with reference 
to the complexion of supervisors. Do you have proof today of 
contact prior to being subpoenaed, let's start with that as our 
asset point. Do you have proof of contact prior to being 
subpoenaed of contacting civil rights organizations?
    Mr. Williams. Yes, sir.
    Mr. Green. Do you have that proof with you today?
    Mr. Williams. I can look at my phone and show you the 
records. I could probably--
    Mr. Green. No, no. You can do this for me. Just tell me 
what organizations did you contact?
    Mr. Williams. My family and I, we reached out to 
Congresswoman Waters' office--
    Mr. Green. Do this for me, organizations, civil rights 
organizations. For example, did you contact the NAACP?
    Mr. Williams. We contacted Reverend Al Sharpton's Action 
Network. We talked to people--because I am from Chicago, we 
talked to people from Operation PUSH.
    Mr. Green. Did you do that personally?
    Mr. Williams. Personally, and other people on my behalf.
    Mr. Green. Just tell me about what you did personally if 
you would, please.
    Mr. Williams. Yes.
    Mr. Green. Personally, you contacted the NAACP?
    Mr. Williams. I didn't contact the NAACP.
    Mr. Green. You did not?
    Mr. Williams. No, sir.
    Mr. Green. Personally, did you contact the National Action 
    Mr. Williams. Yes.
    Mr. Green. Okay. And personally, did you contact some other 
organization that you can call to my attention now?
    Mr. Williams. Yes.
    Mr. Green. Okay. If you would, please?
    Mr. Williams. Back home, I contacted Operation PUSH.
    Mr. Green. PUSH?
    Mr. Williams. Yes.
    Mr. Green. Okay. And any others?
    Mr. Williams. My family--
    Mr. Green. You personally, only what you did personally.
    Mr. Williams. No, sir.
    Mr. Green. Okay. And I have a reason for asking it this way 
in terms of personal contact.
    Now let's talk about this. You are both fair-minded people 
and you want to make sure that you are treated fairly. But you 
also want to make sure that others are treated fairly as well. 
Is this a fair statement that you want to make sure others are 
treated fairly as well?
    Mr. Williams. Sure.
    Mr. Green. Let's talk about some of the others. One of you 
having been a bank examiner, I will just use banks as a part of 
this question.
    If we find that banks have employees who are expressing 
similar concerns, would you want us to hold ex parte hearings 
with reference to these employees? For fear that you may not 
understand the term ex parte, just let me ask you, would you 
want us to hold hearings similar to these hearings with bank 
employees if they were experiencing similar circumstances?
    Mr. Williams, would you want us to hold hearings with 
banks? Or is this just for the CFPB that you want these things 
done? So would you want us to do a similar thing? If you were 
working at a bank and you had similar circumstances, and 
Congress has oversight of banks, would you want us to do this, 
Mr. Williams? Would you want us to hold similar hearings?
    Mr. Williams. I would want you to do what is prudent, yes, 
    Mr. Green. All right. You would want me to hold these 
hearings. Is that right?
    Mr. Williams. Yes, sir.
    Mr. Green. Okay. And Mr. Naraghi, would you want us to do 
the same thing? Or is this only for the CFPB, Mr. Naraghi?
    Mr. Naraghi. No.
    Mr. Green. Would you want us to do a similar thing with 
    Mr. Naraghi. Here is what I would say about that.
    Mr. Green. No, you will say yes or no for this one, please. 
Would you want us to do the same thing if banks were 
discriminating invidiously against people?
    Mr. Naraghi. In my capacity as a bank examiner or just as 
    Mr. Green. No. Would you want Congress to call in to give 
those persons at banks to come before this committee and 
testify? Would you want us to give them the opportunity to do 
    Mr. Naraghi. Do you want my personal opinion or my opinion 
as a bank examiner?
    Mr. Green. Yes. I am asking you for your personal opinion. 
Would you want this to happen? Or is it only for the CFPB?
    Mr. Naraghi. No. If possible, yes.
    Mr. Green. You would. All right.
    Would you want--you said level the playing field, Mr. 
Williams. Would you want us to level the playing field with 
banks? If we find that banks have an unlevel playing field, 
would you want this committee to do what it can--
    Mr. Williams. Absolutely.
    Mr. Green. --to level it?
    Mr. Williams. Yes.
    Mr. Green. All right. Let's move on.
    Would you want us to use disparate impact as a theory with 
banks? You indicated that we are using it today. Would you want 
us to use the same theory with banks?
    Mr. Williams. Absolutely.
    Mr. Green. Would you want us to have persons who are 
working at banks who may be hearing what we are saying today by 
and through television or some other means of hearing these 
proceedings, would you want them to contact us, just as you 
were able to contact us?
    Mr. Williams. Yes.
    Mr. Green. Would you want them to contact us and say, my 
bank is discriminating against me?
    Mr. Williams. Yes.
    Mr. Green. And should we hear from these witnesses just as 
we are hearing from you without the benefit of hearing from the 
other side? If a person says, I have been discriminated 
against, do you want us to hear from them just like I am 
hearing from you today, same way, no change?
    Mr. Williams. Yes.
    Mr. Green. Thank you.
    Sir, Mr. Naraghi? Mr. Naraghi, you hesitated on some 
important questions. Are you here for the CFPB only? Or do you 
want to see people who are being discriminated against 
regardless of the venue have an opportunity to be heard?
    Mr. Naraghi. Sir, the reason I hesitate is it is beyond my 
knowledge or--
    Mr. Green. I am not asking you about what you know about 
banks. I am asking you that if you were working at a bank and 
experiencing these same circumstances, would you want the 
chance to sit in this chamber today--
    Mr. Naraghi. If possible, yes, sir.
    Mr. Green. Okay.
    Finally, you said to change the administration, Mr. 
Williams. If a bank had similar circumstances, would you want 
the administration at the bank changed? I am using your exact 
language. You said--
    Mr. Williams. Yes.
    Mr. Green. --change it.
    You agree, Mr. Naraghi? Are you only here for the CFPB, Mr. 
    Mr. Naraghi. Yes--
    Mr. Green. Do you want to see other people--
    Mr. Naraghi. --I am here for the--
    Mr. Green. --who are discriminated against to have the same 
opportunity? Are you here to eviscerate and emasculate the 
    Mr. Naraghi. I am not.
    Mr. Green. Would you want to see banks treated the same 
    Mr. Naraghi. Absolutely. I think they are because of our 
    Mr. Green. All right. Finally, I would like to submit for 
the record the request that the ranking member and I, along 
with other members of the subcommittee, have made to all seven 
of the Inspectors General with reference to investigating 
complaints of discrimination. This would include the CFPB.
    I would also, Mr. Chairman, ask that we include for the 
record a document titled, ``Objective and Approach for Offices 
of Inspector General (OIG) Review of Office of Minority and 
Women Inclusion (OMWI) Activities. And it goes on to indicate, 
``Requested by Ranking Member and Colleagues, House Financial 
Services Committee, on March 24, 2014.''
    And it indicates, Mr. Chairman, that the Inspectors General 
will be looking into allegations of discrimination, employee 
satisfaction results, hiring, and promotions, and goes on to 
indicate that the final evaluation will be presented by late 
November 2014. If there are no objections, I would like to 
submit these for the record.
    Mr. Fitzpatrick. Without objection, they will be made a 
part of the record.
    Mr. Green. Thank you, Mr. Chairman. I will yield back.
    Mr. Fitzpatrick. The Chair recognizes Mr. Barr for 5 
    Mr. Barr. Thank you, Mr. Chairman. And thank you to the 
witnesses for your testimony here today.
    In reference to the ranking member's line of questioning 
just concluded, Mr. Naraghi, I am just curious. In your time as 
an examiner at the Bureau, did you ever uncover or discover any 
of the kind of discrimination that you personally experienced 
at the Bureau?
    Mr. Naraghi. No, sir.
    Mr. Barr. You testified that results-oriented examinations 
in which these exams were decided or the results of those exams 
were decided at the outset for the purpose of finding a 
violation even if none were identified, and that the field 
manager told you that you must not have done your job right 
because you did not identify any violations. Is that correct?
    Mr. Naraghi. Yes, sir.
    Mr. Barr. Is that a common part of the culture at the 
    Mr. Naraghi. I cannot speak to that about the Bureau. You 
have to remember I represent--I am an examiner in the Southeast 
Region. I have had that happen to me on at least two occasions, 
which even one of them should not happen.
    Mr. Barr. So in other words, you are telling me that at the 
Bureau, in your capacity as an examiner, management basically 
told you that you didn't do your job if you found no violations 
with the regulated entity?
    Mr. Naraghi. Some. Remember, I said we have a lot of 
inexperienced managers. And the Director of my region keeps 
hiring his cronies. So yes, that I have seen.
    Mr. Barr. Okay.
    And Mr. Naraghi, you also testified that individuals in 
your team were told to expand their sample size if no 
violations were identified in their initial sample. And you 
made the point that there is no statistically sound rationale 
for conducting examinations in this manner. Can you explain 
that a little bit more? Can you amplify that a little bit more?
    Mr. Naraghi. Absolutely. Their standard examination 
protocol calls for you to determine a sample size as 
statistically based on what is the total population of that 
area you are examining, the transaction you are examining, and 
you come up with a number. And you randomly select that. The 
reason is for it to withstand the scrutiny both by the bank or 
institution management as well as in a court of law or anything 
that we are treating everybody fairly, unbiasedly.
    When the only time you extend your sample, as the 
examination protocols call for, is if you find enough errors, 
or basically violations, violation of law, violation of their 
own protocols. That is when you expand your sample.
    Mr. Barr. Mr. Naraghi, this sounds kind of like it is a 
fishing expedition. You take a statistically accurate sample, 
and no violations are found. There must be something wrong 
because all the banks are doing the right thing. That is the 
attitude of the Bureau.
    Mr. Naraghi. Actually, it is funny you say a fishing 
expedition because that was my point of argument with the 
enforcement attorney who was wanting to expand the sample. I 
said I don't want--and this is brand new agency. I don't want 
us to appear like we are on a fishing expedition.
    Mr. Barr. And then finally, in your testimony, I think the 
most striking observation that you made about the Bureau in 
which you worked, that lawyers from the Enforcement Division, 
they come into these--they come in and they mention plans to 
bring enforcement actions before the completion of the exam 
work and before discovering a violation.
    So it seems to me that the justice system in our country is 
totally disregarded by this Bureau in the sense that there is a 
presumption that everybody in the private sector is doing 
something wrong. It can't be right if there are no violations. 
And so, we are going to enforce before we even discover that 
there is a violation.
    Mr. Naraghi. Yes. And that is why it bothered me, and the 
occasion that happened to me I documented by sending my 
management an email indicating so.
    Mr. Barr. Do you think that this is a fair-minded approach 
to enforcing consumer protection laws in the United States?
    Mr. Naraghi. Absolutely not.
    Mr. Barr. Let me just ask you one more question or two more 
questions. I don't have much more time, but do you believe that 
the exams that are conducted at the CFPB are aligned with 
industry standards of auditing? Why or why not?
    Mr. Naraghi. No. Because depending on who is conducting the 
exam, who is the member of management, it could be aligned. And 
the ones who are inexperienced or don't have it are not.
    I want to emphasize this. There are a lot of good examiners 
in our system at CFPB and a lot of hard work goes on. What I 
have seen is basically incompetent management that is causing 
these issues that I bring to your attention.
    Mr. Barr. Mr. Naraghi, I appreciate your testimony here 
today. And I think you have really elucidated some underlying 
problems with this agency. I appreciate your testimony.
    I yield back.
    Mr. Naraghi. Thank you.
    Mr. Fitzpatrick. There are no further questions this 
afternoon, so we would like to thank the witnesses for their 
time and for their testimony.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    Without objection, this hearing is adjourned.
    [Whereupon, at 4:17 p.m., the hearing was adjourned.]
                            A P P E N D I X

                             June 18, 2014